The ebullated bed process for hydrogenation of coal is described in Johanson, U.S. Pat. No. Re. 25,770, and in Keith et al., U.S. Pat. No. 3,519,555. An extension of the teachings is disclosed in Wolk et al., U.S. Pat. No. 3,540,995. This process converts coal to hydrocarbon gases, distillate and residuum oils by direct contact with hydrogen in an ebullated catalyst bed reactor. The present invention is directed to improvements in the process to minimize the production of residuum and maximize the production of valuable oil distillates. It has been found that the yield of distillates can be increased materially by increasing the residuum composition in the reactor liquid. This can be accomplished by recycling a residuum stream back to the reactor. However, the stream leaving the ebullated bed reactor which contains residuum also contains the unconverted coal and ash product. Therefore, at least a portion of this stream must be reduced in solids concentration before it can be recycled back to the reactor to prevent the solids concentration in the reactor liquid from increasing to an inoperable composition. But it has also been found that there is a limit to the separability of the uncoverted coal and ash contained in the residuum stream to be recycled with the use of only liquid cyclones.